I’m a tax lawyer based in San Francisco (www.WoodLLP.com), but I handle tax matters everywhere. I enjoy untangling a tax mess from the past, disputing taxes with the government or planning taxes for the future. One of my specialties is advising about lawsuit payments. Whether you’re receiving or paying a legal settlement, you can probably improve your tax position. I write frequently about taxes, from expatriation to sales tax, from selling your company to restitution. I’ve written over 30 tax books, but my best seller is still Taxation of Damage Awards and Settlement Payments. Contact me at wood@WoodLLP.com.

Wesley Snipes Turns 50 In Prison But Didn't File False Tax Return

Wesley Snipes just celebrated his 50th birthday—in federal prison. The film star remains there over tax charges. See Actor’s depressing 50th birthday. You may think Snipes was mislead by advisers or just plain foolish to end up in jail over tax charges.

Maybe, but he’s not alone and it could have been much worse. After all, Snipes was convicted of failure to file, a misdemeanor. Filing falsely is a felony. You can be prosecuted for failure to file or for filing falsely.

You must file a tax return each year with the IRS if your income is over the requisite level. Snipes is over, way over. As Snipes’ misdemeanor convictions show, failing to file carries smaller penalties than filing fraudulently.

The U.S. taxes all income wherever you earn it. So forget arguing that only foreign-source income is taxable, making your domestic income exempt. There is a convoluted argument that foreign income is different, but don’t bother making it.

In fact, a variation of this bogus theory is the one that got Mr. Snipes in trouble, consigned to three years in prison. Stay away from other crazy arguments too.

Example: You file your original return April 15 and state you aren’t subject to income taxes because they are unconstitutional and you are not a slave to the federal government. You had better file an amended tax return properly reporting your income and paying your tax before the IRS contacts you to tell you they disagree with your original return. See Ten Tax Protestor Claims To Avoid.

Once you’ve filed your return, you can’t be prosecuted for failing to file an amended return, even though something may happen after you file that makes clear your original return contained mistakes. Yet if you knew the return was inaccurate when you filed it you should amend it to make it accurate without delay.

The IRS rarely brings up an originally filed return in audits or criminal prosecutions once the taxpayer comes forward and attempts to correct it by filing an amended return. But to take advantage of this rule you need to be proactive. You need to make the correction before the IRS finds your error.

According to E! Online, this federal prison camp houses roughly 290 white-collar inmates. Remember Snipes in “White Men Can’t Jump“? Perhaps in his new digs Snipes should start shooting a sequel: “White-Collar Men Can’t Jump.”

In his immensely successful screen life, Snipes normally cares about film release dates. But his next release date is more important: He’s scheduled for a July 19, 2013 release. That means less than a year to go.

Robert W. Wood practices law with Wood LLP, in San Francisco. The author of more than 30 books, including Taxation of Damage Awards & Settlement Payments (4th Ed. 2009 with 2012 Supplement, Tax Institute), he can be reached atWood@WoodLLP.com. This discussion is not intended as legal advice, and cannot be relied upon for any purpose without the services of a qualified professional.

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Thanks for this helpful clarification. As usual, the nuances of the facts, the charges and the ones of which he was convicted are key, and I appreciate your corrections. Moreover, your comment alludes to the 861 argument. That technical argument (and some others) can convince even well meaning and intelligent people to take particular tax positions that later turn out to be wrong, in some cases laughably wrong.

I don’t know what the answer is. One possible answer would be a vastly simpler tax system that doesn’t depend on incredibly complex rules and people who promote tricks to exploit them. Much of the current debate about Mitt Romney’s 13% taxes reflects a kind of collective distrust of a system that, sadly, has gotten out of control.

Please show me the law that states that you have to pay Income Taxes? I have been told before that it is the law ok well then show me the law. It seems to me that the IRS resorts to blackmail and fear tactics to enforce a law that doesn’t exist. Smaller courts make rulings siding with the IRS against the rulings of the supreme court and those cases stating that the 16th amendment does not allow the IRS the power to enforce any new taxes. so if the supreme court says that it is unconstitutional then it is. They are not theories they are facts! You should really look into that before you continue to keep the lies going regarding the Fraud known as Federal Income Taxes. PEOPLE DO YOUR OWN RESEARCH ON THIS SUBJECT DON’T LET PEOPLE WHO WRITE ARTICLES THINK FOR YOU!

Yes, thanks for your comment. The seeming arbitrariness of who gets prosecuted and for what can indeed seem out of whack. One could argue that’s even true on the Snipes case facts. It can seem wrong for people to suffer very serious consequences without (in many cases) any holding to account of the professionals involved.

The IRS and the Justice Department do their best to identify and discipline or prosecute wrongdoers. It may not be apparent from the Snipes case, but they often try to pursue those driving the car, not merely those who are passengers. But historically the government has a very hard time prosecuting advisers, as many of the tax shelter prosecutions reveal.

Sometimes the best they can do is to shut down an operation, as they have done with a number of return preparation businesses. At the higher end, it has been even more difficult. Even highly paid or wealthy people have to be careful where they are getting advice.

Snipes doesn’t file or files a false return and is thrown into prison. Politicians, CEO’s and their ilk hide income overseas or file “inaccurate” returns and never even get charged. This is exactly why many Americans no longer have faith on our government.